Apple Works on Line of Less-Expensive iPhones

Apple Inc. is working on the first of a new line of iPhones and an overhaul of software services for the devices, people familiar with the matter said, moving to accelerate sales of its smartphones amid growing competition.

One of the people, who saw a prototype of the phone late last year, said the device is intended for sale alongside Apple’s existing line. The new device would be about half the size of the iPhone 4, which is the current model.

The new phone would be available to carriers at about half the price of the main iPhone repertoire. That would allow carriers to subsidize most or all of the consumer’s cost, putting the iPhone in the same mass-market price range as rival smartphones, the person said. Apple currently sells iPhones to carriers for $625 apiece on average. With carrier subsidies, consumers can buy iPhones for as little as $199 with a two-year contract.

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